Refer to the diagram, in which S is the market supply curve and S₁ is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. If the government wishes to establish an optimal allocation of resources in this market, it should Multiple Choice a. not intervene because the market outcome is optimal. d. subsidize consumers so that the market demand curve shifts leftward. c. subsidize producers so that the market supply curve shifts leftward. d. tax producers so that the market supply curve shifts leftward. 2. Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D₁ and S₁. If there are substantial external benefits associated with the production of Z, then Multiple Choice a. government can improve the allocation of resources by subsidizing consumers of Z. b. government can improve the allocation of resources by imposing a per-unit tax on Z. c. a government subsidy for producers of Z would ensure that consumers are paying directly for all of the benefits they receive from Z. d. consumers are paying too much for the good.
Refer to the diagram, in which S is the market supply curve and S₁ is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. If the government wishes to establish an optimal allocation of resources in this market, it should Multiple Choice a. not intervene because the market outcome is optimal. d. subsidize consumers so that the market demand curve shifts leftward. c. subsidize producers so that the market supply curve shifts leftward. d. tax producers so that the market supply curve shifts leftward. 2. Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D₁ and S₁. If there are substantial external benefits associated with the production of Z, then Multiple Choice a. government can improve the allocation of resources by subsidizing consumers of Z. b. government can improve the allocation of resources by imposing a per-unit tax on Z. c. a government subsidy for producers of Z would ensure that consumers are paying directly for all of the benefits they receive from Z. d. consumers are paying too much for the good.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter5: Difficult Cases For The Market And The Role Of Government
Section: Chapter Questions
Problem 10CQ
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Transcribed Image Text:Refer to the diagram, in which S is the market supply curve and S₁ is a supply curve comprising all
costs of production, including external costs. Assume that the number of people affected by
these external costs is large. If the government wishes to establish an optimal allocation of
resources in this market, it should
Multiple Choice
a. not intervene because the market outcome is optimal.
d. subsidize consumers so that the market demand curve shifts leftward.
c. subsidize producers so that the market supply curve shifts leftward.
d. tax producers so that the market supply curve shifts leftward.
2.
Refer to the competitive market diagram for product Z. Assume that the current market demand
and supply curves for Z are D₁ and S₁. If there are substantial external benefits associated with
the production of Z, then
Multiple Choice
a. government can improve the allocation of resources by subsidizing consumers of Z.
b. government can improve the allocation of resources by imposing a per-unit tax on Z.
c. a government subsidy for producers of Z would ensure that consumers are paying directly for
all of the benefits they receive from Z.
d. consumers are paying too much for the good.
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